The Coming Crisis: Neoliberalism’s survival and the crisis of imagination

To capitalise on the crisis and create a post-neoliberal economic order, progressives need new lenses for understanding everyday economic life

The last crisis was one of growth. The next crisis may be coming, but the growth crisis goes on. Yet capitalism, which cannot countenance stagnation, has survived. How? This relates, among other things, to how a given distribution of wealth is institutionalised. Political-economic regimes will only fundamentally falter once those at the top of the wealth distribution have exhausted the resources available to them to maintain the established order.

These resources are not purely material. They will include the ideas that proffer legitimacy upon accumulative and distributive processes – indeed the strength of such ideas may effectively obscure practices within the economy that materially favour certain groups.

This brings me to neoliberalism, and the possibility of a genuinely post-neoliberal economic order in the advanced capitalist economies. Neoliberal statecraft is now characterised by the large-scale manipulation of money and credit by non-market authorities (for instance, the role of quantitative easing in boosting asset prices), but such initiatives remain obscured and, perversely, legitimised by the market metaphor.

The quite remarkable paper published recently by three International Monetary Fund (IMF) economists, arguing that neoliberalism may have been ‘oversold’, signals that this legitimisation process may finally be unravelling. For a major international economic institution to even acknowledge that neoliberalism exists, and that alternative ways of understanding economic life are possible, is a rather momentous occasion.

The IMF had already called time on the efficacy of ‘austerity’, at least in large economies, and if the neoliberal assumptions at the base of austerity are now also in question among the global intelligentsia, then we may soon be in the genuinely uncharted territory of experiencing a further, deeper global economic crisis in which the ideas underpinning neoliberal capitalism, as well as its constitutive economic practices, are up for discussion. The domestic and international implications of Brexit remain uncertain – I have argued that the leave campaign won by building upon the inherent anti-state orientation of the austerity narrative – but clearly add to the sense of the established order being disrupted.

Are neoliberalism’s critics ready to capitalise? The most coherent set of responses to the last crisis came from Keynesian economists, who not only criticised austerity but also identified its abandonment as integral to the onset of apparent recovery in the UK. Paradoxically, the Keynesians appear to have been much more vocal within Anglo-American polities – the centre of neoliberal capitalism – than within the neoliberal-lite capitalist varieties of Europe and East Asia.

Yet this is arguably explained by the fact that Keynesianism and neoliberalism are not as far apart as often assumed in how they perceive economic life (in contrast to their policy prescriptions regarding conventional fiscal expansion). As I argue in Austerity Politics and UK Economic Policy, the Keynesians therefore offer only a partial lens on austerity.

An arguably more sophisticated response comes from those who would play monetary neoliberalism at its own game, using highly unconventional monetary policy (discussed by both Jacqueline Best and Jeremy Green in this series) to undermine rather than reinforce the established distributive order. Andrew Baker and Richard Murphy combined both perspectives in advocating an ‘investment state’ – yet they concentrate rather more on the mechanisms by which the state can generate and facilitate long term investment rather than on what exactly we should be investing in.

This is no criticism of Baker and Murphy, but it is apparent that, as a whole, the progressive vision for what economic life could or should look like in a post-crisis environment remains disappointingly abstract.

The ‘what?’ question regarding investment is therefore effectively marginalised, beyond glib endorsements for more investment in greener technologies or R&D in general. But it is through practices of actual production that most people will experience economic life. The goods and services that are being produced will shape people’s live indelibly – from the jobs they will do and the skills they will develop, to the places they live and the cultures they will be exposed to.

Similarly, corporate governance structures will shape how workplaces are experienced – indeed Colin Crouch identified ‘the giant corporation’ as central to neoliberalism’s non-death. Corporate governance is ‘the missing meso’ when set alongside the left’s traditional focus on the macro-economy, a predilection which occupies even those that have campaigned most vociferously against austerity.

In essence, what exactly should a progressive production system look like in an age of meaningless consumerism, environmental decay and fictitious capital, where automation sits alongside near-full employment in evermore repressive and hollowed-out labour markets?

To acknowledge that production cannot be planned centrally is not the same as accepting that certain forms of production, and associated business models, cannot be nurtured. This is the thinking that needs to be done by progressive actors before macro-economic policy is designed.

Moreover, my point here is not to dismiss the importance of the macro-economy (or its transformation), but rather that progressives need to think about it in more concrete terms with reference to everyday economic life. Crucially, this is surely the only approach likely to facilitate the mobilisation of millions of ‘ordinary’ people within the struggle against neoliberalism, as they see the value of progressive action immediately within their actual lives.

Of course, all of this is, admittedly, more easily said than done. The parties that have done most to dent the neoliberal hegemony in Europe, such as Podemos in Spain and Syriza in Greece, have been elevated in part due to popular resistance to austerity measures. Paradoxically, the fiscal circumstances of their countries leave little room for genuine radicalism, even when formal office is attained.

In the UK, Labour leader Jeremy Corbyn and shadow chancellor John McDonnell have paid little more than lip-service to the politics of production; McDonnell’s advocacy of ‘socialism with an iPad’ was about as cringe-worthy as politics can get. In the US, Bernie Sanders has done a much better job of articulating working-class concerns around economic insecurity, but not nearly as good a job as Donald Trump.

Corbyn’s case for refusing to resign despite a vote of no confidence by 80 per cent of the Parliamentary Labour Party is essentially that he has been given a mandate for a radical policy agenda. Yet even on the hard left of Anglo-American politics, transformative ideas are in short supply. The next crisis may be of capitalism and its ability to produce enough growth to maintain the social order. But it will have another, more serious dimension for the left: a crisis of imagination.

But we must not assume that political innovation only happens via sparks of genius from messiah-like individuals. It is a collaborative process, in which convincing answers to the big questions can only be formed when the questions are being asked through the lens of the actual (economic) lives lived by those who will populate any new order.

Neoliberalism may yet survive the next crisis, as long as the custodians of progressive politics remain profoundly disconnected from the people who would benefit from change. Progressives continue to define their objectives in the language of the old order, and appear to have lost their ability to describe the kind of lives they want people to be empowered to live. It is hard to see the vacuum being filled by anything other than a further rise in nationalist ideology, which has proven itself entirely willing to accommodate neoliberal economic doctrine.